Mecklenburg County goes deep undercover – and deep into the numbers

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The operation’s codename was Project Sunset, and John Allen was Mecklenburg County’s agent on the case.

He runs the numbers.

The 2009 Project Sunset assignment was one of his first undercover operations since signing on as the county’s economic development director.

The clock began running after a multinational corporation that has $110 billion in annual revenues covertly signaled an interest in moving its North American headquarters to the Charlotte area, saying it would create more than 738 jobs paying an average salary near $95,000.

The Queen City’s power brokers who received that signal sat up and paid attention: the city’s business leaders, including the Charlotte Chamber of Commerce, who codenamed the operation, and the politicians in Raleigh and in the Charlotte-Mecklenburg Government Center.

In closed-door sessions, the state and local civic leaders discussed forking over incentives, which the public would not learn of until months later.

The state promised to kick in $25 million if job creation targets were met and sustained for 12 years, plus $1.2 million from the One North Carolina Fund.

That last grant involved a local match, and that’s when Allen began going over the deal.

The Mecklenburg Board of County Commissioners has asked its economic development director to run such numbers since 2002, and is one of the only local governments in the state to actually weigh the costs and benefits of giving away millions – to companies that make billions – by doing a fiscal impact study for each corporate incentive the county considers. The city of Charlotte, for example, does not.

Allen fed into his software, called LOCI, the basic data: Project Sunset’s projected capital investments and job creation on one hand, and on the other the $800,000 the county was ready to give the company and the costs to the county of providing services to the people the company brought here.

Then Allen input his own special sauce of more than a dozen shifting factors unique to Mecklenburg County at a given time.

“Some of the information I input includes tax rates, assessed values, population, budget information, number of students at CMS, retail sales, commuting patterns,” Allen said.

LOCI, developed in 1999 as the first widely available program of its kind – spit out a simple spreadsheet measuring the net benefit to the county government over 10 years: nearly $4.8 million.

When the BOCC, meeting in one of those secret sessions, saw that number, investing in Project Sunset was a go.

State and local governments justify incentives to corporations by arguing that the market for relocations is extremely competitive. North Carolina, according to UNC-Charlotte economics professor John Connaughton, has one of the weakest incentive programs in the country, “much weaker than Virginia and especially South Carolina.”

Or perhaps, said Harrison Campbell, a UNC-Charlotte assistant professor of geography who specializes in analyzing regional economic development, “smarter” might be a better word for what the Tar Heel State does.

The state, for example, uses “performance-based benchmarks,” Campbell said, meaning new companies must pay their full annual property tax bills until they create the jobs they said they would, and only then would they receive tax rebates.

In the S.C., on the other hand, companies can get more of their incentives upfront through programs such as Pilot, or Payment in Lieu of Taxes, where companies can make small annual payments rather than making good on their entire property tax bills, and can do so for up to 30 years.

On Dec. 16, 2009 Charlotte Chamber leaders assembled, Gov. Bev Perdue showed up and fanfare blared as they dramatically unveiled Project Sunset to be the biggest business operation to move to the area in a quarter-century.

Electrolux, it was revealed, the Swedish household-appliance giant, was moving its North American headquarters to University City.

And, as it turned out, the move came on the eve of an unforeseen but welcome upswing for the company, which has kept on expanding its Charlotte operations since 2009, more than doubling the original jobs projections.

Beginning with an original pledge of $841,635 in 2010, Mecklenburg County has promised Electrolux more than $5.2 million in incentives over the past four years of expanding future plans.

So far, Electrolux has received $109,936.

The delay, Allen said, is because those company must hit all those investment and job-creation benchmarks first, which often takes years.

“The company must first make their capital investment, pay their taxes and then a preapproved percentage of the taxes they paid is returned to the company, provided they meet (and) maintain their required hiring goals,” Allen said.